Original article

Ecological economics: themes,

approaches, and differences
with environmental economics
Jeroen C.J.M. van den Bergh

Abstract This article provides a short overview of

the main themes of ecological economics (EE). It is
argued that EE provides a platform that fosters
multidisciplinary environmental research by bringing together the core contributing disciplines
economics and ecology. In addition, EE is regarded
as a pluralistic approach to environmental research
that can be set opposite to, and has indeed developed as a response to, traditional environmental and
resource economics. A comparison of the two elds
is presented to clarify the essential differences between them. In addition, specic themes are examined in more detail. These include: sustainable
development; the growth debate; international trade;
dynamic processes; and behaviour and policy.
Keywords Comparison Environmental
policy Growth debate Individual
behaviour International trade Multilevel
dynamics

Background
The eld known as ``Ecological Economics'' (EE) was
founded at the end of the 1980s. 1 It immediately attracted
a large number of researchers from various disciplinary
backgrounds that were involved in the study of environmental issues. EE very quickly developed into a eld that
was successful in several respects (Costanza and King
1999): many publications and citations to these were
produced; regular conferences and workshops were held;
and communication among disciplines and countries, as

Received: 21 February 2000 / Accepted: 22 September 2000 /

Published online first: 8 December 2000
Springer-Verlag 2001
J.C.J.M. van den Bergh
Department of Spatial Economics, Free University,
De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands
e-mail: [email protected]
Fax: +31-20-4446004

well as between universities and other organisations, was

active. EE integrates elements of economics, ecology,
thermodynamics, ethics, and a range of other natural and
social sciences to provide an integrated and biophysical
perspective on environmenteconomy interactions, aimed
at contributing to structural solutions to environmental
problems. The core of EE can be associated with the goal
of sustainable development, interpreted as both intra- and
intergenerational equity; the view that the economy is a
subsystem of a larger local and global ecosystem which
sets limits to the physical growth of the economy; and,
a methodological approach based on the use of physical
(material, energy, chemical, biological) indicators and
comprehensive systems analysis.
EE provides a forum for multidisciplinary environmental
research as well as an alternative view and approach to
traditional environmental (and resource) economics
(ERE). Various economists, ecologists and environmental
researchers have been dissatised with the way in which
environmental problems and policy are studied by ERE. 2
On the one hand, ecological economics offers criticism of
the ERE approach, and, on the other, it tries to develop
and apply alternative methods and approaches. 3 Nevertheless, EE has perhaps been most successful in promoting
multidisciplinary research in which natural scientists
1

The International Society for Ecological Economics (ISEE) was

founded by participants at a workshop in Barcelona in 1987, while its
roots go back at least to a meeting on the integration of economics
and ecology in Sweden in 1982 (Jansson 1984). Spash (1999) and
Martinez-Alier (1999) provide more details on the origins of ISEE.
The journal Ecological Economics was founded in 1989 by R. Costanza and H.E. Daly, who are still its editor-in-chief and associate
editor, respectively. An early collection of articles aimed at dening
ecological economics is supplied by Costanza and Daly (1987)
2
Traditional environmental economics is based on neoclassical
welfare theory and microeconomics. Its core insights are critically
dependent on the assumption of rational individual behaviour (utility
or prot maximisation), which together with an additional assumption of market clearing generates a unique economic equilibrium, that
is, a unique combination of prices and tradable quantities of each
product on each market (including the ones for labour and capital).
Good introductions to traditional environmental economics are offered by Baumol and Oates (1988), Kneese and Sweeney (1985/1993)
and Siebert (1995); a modern treatment, mixing traditional and
ecological economics perspectives is Perman et al. (1999)
3
Important contributions covering both criticism and alternatives include the following: Georgescu-Roegen (1971), Boulding
(1978), Sagoff (1988), Daly and Cobb (1989), Faber and Proops (1990),
Costanza (1991), Daly (1977/1991), Ekins and Max-Neef (1992), Daly
and Townsend (1993) and Norgaard (1994)
DOI. 10.1007/s101130000020

Reg Environ Change (2001) 2:1323

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Original article

analogies from biology (Boulding 1978) and other sciences

(Boulding 1970). The statistician-economist N. GeorgescuRoegen is best known in economics for his contributions
to utility theory and activity analysis. In the 1960s and
1970s he wrote seminal publications on the foundations of
economics, which were very critical towards standard
neoclassical economics (Georgescu-Roegen 1966, 1971,
1976). In particular, his interpretation of economic processes in the context of thermodynamics has generated
many responses and debates in EE [see Gowdy and Mesner
1998; and various contributions in a special issue of Ecological Economics (Daly 1997)]. C.S. Holling has perhaps
been the ecologist who has had the greatest direct inuence on EE. His ideas on ecosystem stability and resilience
(Holling 1973) are the most referred to notions in theoretical ecology, which have even been picked up by
economists (see Levin et al. 1998; Perrings 1998). These
notions have been translated to the context of biodiversity
(Holling et al. 1995). Holling has also developed the idea
that (terrestrial) ecosystems do not necessarily follow a
pattern of succession towards a climax, but instead can go
through a repeated cycle (Holling 1986). In addition, he
has inuenced approaches to integrated modelling and
adaptive management (Holling 1978; and more recently
Gunderson et al. 1995). Finally, the systems ecologist H.T.
Odum has inuenced EE through his EMERGY analysis
approach (Odum 1971), which has been applied to EE issues by many of his students including R. Costanza, C.
Hall and I.-M. Jansson. EMERGY analysis traces all environmental products and services back to solar energy,
which provides the energetic basis of ecosystem processes
and functions. Odum himself has even proposed applying
the method to the integrated study of economicecological
interactions ranging from local to global scales (e.g., Odum
1987). An ambitious and interesting study in this vein is by
Zuchetto and Jansson (1985). EMERGY analysis has its
strong proponents and opponents (for a short introduction, see Herendeen 1999).
EE is nowadays clearly present at an institutional level,
with an international society see http://isee.ecoeco.org,
various regional societies (US, South America, Canada,
Europe, Russia, Asia/Australia), and an academic journal (Ecological Economics). In addition, various books
(van den Bergh and van der Straaten 1994, 1997; Jansson
et al. 1994; Krishnan et al. 1995; van den Bergh 1996;
Costanza et al. 1996, 1997a, b; Cleveland et al. 2000;
Edward-Jones et al. 2000; Munasinghe et al. 2000) and
articles (Turner et al. 1997; Martinez-Alier 1999; Spash
1999; Turner 1999) have appeared that offer a variety of
perspectives on EE. These indicate that EE is pluralistic
rather than striving towards a dominant and general
theory. As a result, EE is internally much more heterogeneous than standard ERE, where the neoclassical
paradigm denes the direction of research.
This article discusses the main themes within EE. These
include: sustainable development, the growth debate,
international trade, dynamic processes, and behaviour and
4
In 1949 Boulding received the prestigious John Bates Clark
policy. First, however, the section below explores the
Medal, awarded by the American Economics Association every
2 years to an outstanding economist under 40. In 1968 he was elected opposition that some perceive between EE and ERE.

(notably ecologists) and social scientists (notably economists) join forces.

The economists K.E. Boulding, H.E. Daly and
N. Georgescu-Roegen and the ecologists C.S. Holling and
H.T. Odum are usually considered to be the intellectual
founders and antecedents of EE. Martinez-Alier (2001),
Christensen (1989) and Costanza et al. (1997a, Chap. 2)
discuss the relevance for EE of ideas of early and some
almost forgotten writers like P. Geddes, A. Lotka,
J.S. Mill, F. Soddy and many others. Finally, specic writings by economists and ecologists have directly or indirectly inuenced authors and writings in EE; an incomplete
list of these fundamental publications is: Kapp (1950),
Ciriacy-Wantrup (1952), Galbraith (1958), Cumberland
(1966), Mishan (1967), Ehrlich (1968), Hardin (1968), Ayres and Kneese (1969), Isard (1969, 1972), Leontief (1970),
Meadows et al. (1972), Clark (1973), Hueting (1974/1980),
Page (1977), Costanza (1980), Norgaard (1984, 1985),
Vitousek et al. (1986), Martinez-Alier (2001), and some of
the literature mentioned in the next paragraph.
A short discussion of the main players can give the reader
a feel for the issues that gave rise to the development of EE.
At the end of the 1960s, H.E. Daly proposed the idea of a
``steady state economy'', associated with the objective to
minimise the use of materials and energy (``throughput'')
in the economy (Daly 1968, 1977/1991). This was an
essential contribution to the longstanding ``growth debate''
(see later section). Daly has also written extensively about
the maximum physical scale of the economy, international
trade, and sustainable welfare indicators (Daly 1992, 1996,
1999a; Daly and Cobb 1989). In particular, he can be
characterised as someone who fosters communication and
discussion in science on issues relating to growth, economic theory, thermodynamics, population, and more
recently globalisation (see especially Daly 1999b).
K.E. Boulding was already famous and respected in
economics before he showed an academic interest in environmental issues. 4 He is best known in EE for an article
in which he contrasts the ``cowboy economy'' and the
``spaceship economy'' (Boulding 1966). Within the cowboy
economy a metaphor for the local or national open
economy people are little worried about the quality of
environment and nature, and observe merely local environmental problems. Therefore, they regard migration and
shifts to new resources as solutions. Conversely, the
spaceship economy a metaphor for the world as a whole
is characterised by limited material and food supplies.
The survival strategy in this case is economic use of materials, energy and environment, and maximisation of recycling of substances, materials and products. This
spaceship metaphor reects the implications of the massbalance principle, and can also be seen as a precursor of
the modern view on global environmental problems.
Boulding is renowned for often employing metaphors and

President of the American Economics Association (see Mott 2000)

14

Reg Environ Change (2001) 2:1323

Original article

Ecological versus traditional

environmental economics
The difference between EE and ERE relates to a number of
issues. These are discussed below. The core of ERE is the
theory of (negative) externalities or external costs. This
considers environmental degradation and use of unpriced
natural resources as a negative effect outside the market by
one economic agent on another, without any form of
compensation taking place. This implies that the environmental problem is cast in terms of an interaction
between people (economic agents), that is, nature and
environment are only implicitly described EE is instead
more interested in an explicit modelling of peopleenvironment or economicecological relations, by mapping
out causeeffect relationships and dynamic processes
within the environment (hydrological, chemical, physical
and ecological). According to Turner et al. (1997) this is
due to the fact that EE is more closely related to traditional
``resource economics'', notably concerning renewable
resources like sh, forests and water (Clark 1990; Neher
1990), than to environmental economics in a narrow sense
(``economics of pollution'').
Another important opposition is between scale and allocation. ERE is aimed at optimal allocation and thus efciency of use of scarce means (including resources).
Environmental problems are translated through the concept ``externality'' (or ``external effect'' or ``external cost'').
The objective is to nd the optimal level of an externality,
which follows from striving towards optimal social welfare
or Pareto efciency. The latter is dened as a situation in
which an improvement in the welfare of any individual
cannot be achieved without a welfare loss for someone
else. ERE considers natural resources (gas, oil, sh, timber), environmental quality, services rendered by the environment, and nature as scarce resources to which
(optimal) allocation theories are applicable. Daly (1992)
has since long argued that economists have neglected the
issue of an optimal physical scale or size of the economy,
and instead have focused completely on allocation issues.
In the context of environmental sustainability and sustainable development goals, the scale problem has received
much attention, shown also by academic and policy discussions about indicators for determining the physical
dimensions of the economy (Gibson et al. 2000; see also
the later section on `International trade and environment').
EE has chosen sustainable development as its central
concept. This is subsequently approached both qualitatively and empirically, with particular attention to spatial
scales (ranging from local to global). Within ERE, sustainable development is usually regarded as being identical
to sustainable growth, which is studied with general and
abstract models that avoid any reference to historical and
spatial aspects, as well as specic characteristics of countries. ERE does not seem to take absolute physical limits to
growth as seriously as EE, and regards the problem of a
``maximum scale'' of the economy as irrelevant. A special
point of attention in EE is the structure and institutional

context of developing countries. Linked to this is a more

serious contribution from, and more interaction with,
scientists from developing countries (for instance, the locations of the ISEE World Congress alternate between the
North and the South). In addition, EE generally assumes a
longer time horizon than ERE and, consistent with this,
pays more attention to causeeffect chains, interactions
and feedback between natural and humaneconomic systems. The concept ``co-evolution'' is relevant here, as it is
considered to reect a mutual inuence of economic and
environmental systems which creates a unique historical
development. In this sense EE is closer in spirit to evolutionary than to neoclassical economics. Evolutionary
economics is characterised by concepts like path dependence, historical accidents and irreversibility of changes.
Path dependence implies that possibly inferior technologies can become dominant as a result of unforeseeable
historical events in combination with economies of scale,
due, inter alia, to positive network externalities (witness
the market dominance of Microsoft operating systems).
An implication of co-evolution is that the market does not
necessarily lead to a selection of (in a neoclassical sense)
optimal technologies, production activities and use of
space, even when prices are ``correct''. Therefore, EE
considers systems, including markets, as adaptive and
coincidental rather than optimal.
The main goals and criteria for evaluating developments,
policies and projects differ between EE and ERE. The
dominant criterion of ERE is ``efciency'' (or sometimes a
more limited version, such as cost-effectiveness). Most
economists would regard this as something trivial and
hardly ethical. Nevertheless, it presumes that ``more is
always better''. Furthermore, whereas in ERE distribution
and equity are secondary criteria, EE emphasises (basic)
needs, NorthSouth welfare differences, and the complex
link between poverty and environment. In addition, EE is
best characterised by the ``precautionary principle'', linked
to environmental sustainability, with much attention to
``smallprobabilitylargeimpact'' combinations. 5 This
precautionary principle is closely related to a concern for
instability of ecosystems, loss of biodiversity, and environmental ethical considerations (``bio/eco-centric ethics''). ``Efciency'' is of secondary concern in EE.
``Distribution'' is often considered as a more important
criterion for evaluating policies and changes than efciency. In addition, some argue that it is impossible to
analyse distribution and efciency separately. This would
mean that the main tool of ERE, namely, equilibrium
analysis, which assumes that efciency can be assessed
independent of distribution, is inaccurate at best (Martinez-Alier and O'Connor 1999).

5
ERE in general emphasises uncertainty and instability within the
economy (macroeconomic stability, business cycles) rather than environmental uncertainty. Nevertheless, ERE has made many contributions to studying environmental uncertainty in specic cases,
notably in the context of climate change modelling, and related to the
notions of option value and quasi-option value [see a special issue of
Resource and Energy Economics on ``Irreversibilities'' (Fisher 2000)]

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Table 1
Differences in emphasis between EE and ERE
Ecological economics

Traditional environmental and resource economics

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.

Optimal scale
Priority to sustainability
Needs fullled and equitable distribution
Sustainable development, globally and North/South
Growth pessimism and difcult choices
Unpredictable co-evolution
Long-term focus
Complete, integrative and descriptive
Concrete and specic
Physical and biological indicators
Systems analysis
Multidimensional evaluation
Integrated models with causeeffect relationships
Bounded individual rationality and uncertainty
Local communities
Environmental ethics

ERE focuses on value dimensions, namely, utility and

welfare in theory, and costs and benets in practice. Unlike neoclassical economics, EE does not regard a total
valuation of changes in ecosystems as the sum of private
values. For the latter takes no account, or insufcient account, of internal environmental system functions, ``lifesupport'' functions, future generations and non-instrumental existence values. EE is inclined to add criteria to
the economic values in the context of decision-making
concerning management of and changes in ecosystems.
The terminology ``ecosystem health'' is used to cover aspects like productivity, stability and resilience of ecosystems, biodiversity (genes, species, ecosystems) and the
quality of the abiotic environment (Costanza et al. 1992;
see also the journal Ecosystem Health).
Next, EE criticises social objectives such as those formulated within ERE, notably the utilitarian approach to intergenerational welfare. Alternatives are a Rawlsian
principle of justice (``maximin criterion''; Rawls 1972), or a
minimum welfare level encompassing (basic) needs (Stern
1997). This is, of course, all just theory and can hardly be
operationalised In practice, the striving for GDP growth at
a macro-level and cost-benet analysis at a project level
remain. Which alternatives are offered by EE in this respect? Some have pleaded in favour of physical or ecological indicators [material intensity per unit of service
(MIPS), ``ecological footprint'', ``ecosystem health''] and
others in favour of a multidimensional analysis based, for
example, on multicriteria evaluation (Munda et al. 1994;
Martinez-Alier et al. 1998). In addition, EE seems to discard consumer sovereignty when giving priority to the
interest of systems above the freedom of choice of individuals, as in environmental movements like ``deep
ecology.
Within EE, a far-reaching integration of economics with
insights from ecology is proposed Ecology is the area
within biology that studies the relation of living organisms with their biotic and abiotic environment. It distinguishes various dynamic processes in ecosystems:
namely, population growth, ecosystem succession,
changes of natural equilibria, and evolution (see the later
16

Reg Environ Change (2001) 2:1323

Optimal allocation and externalities

Priority to efciency
Optimal welfare or Pareto efciency
Sustainable growth in abstract models
Growth optimism and ``win-win'' options
Deterministic optimisation of intertemporal welfare
Short- to medium-term focus
Partial, monodisciplinary and analytical
Abstract and general
Monetary indicators
External costs and economic valuation
Cost-benet analysis
Applied general equilibrium models with external costs
Maximisation of utility or prot
Global market and isolated individuals
Utilitarianism and functionalism

section on `A hierarchy of dynamics'). An operational

technique for the aimed integration is ecologicaleconomic modelling at local, regional and global scales (see
Braat and van Lierop 1987; Costanza et al. 1993; van den
Bergh 1996).
EE has often expressed a dissatisfaction with the strict and
xed assumptions in traditional economic theory with
regard to individual behaviour. They are usually summarised in the notion of ``(unbounded) rationality'' and
models of maximisation of prot (rms or entrepreneurs)
and utility (households or consumers). These models underlie the analytical insights obtained by ERE with respect
to economic valuation and environmental policy. Various
branches of economics and closely related disciplines,
such as evolutionary economics, institutional economics,
experimental economics, psychology and sociology, have
presented theoretically and empirically based critiques on
these models. Although EE seems to be sympathetic to
these critiques, it has generated few alternative approaches
thus far. Van den Bergh et al. (2000) discuss the neoclassical approach, survey the criticism of it and present a rst
analysis of the implications of alternative models of individual behaviour for environmental policy. Such models
include, among others, `satiscing', lexicographic preferences, relative welfare, habits and routines, imitation, reciprocal behaviour (including various types of altruism),
changing and endogenous preferences, and various models
of behaviour under uncertainty. Spash and Hanley (1995)
argue that lexicographic preferences offer an explanation
for some of the problems met in economic valuation
studies, notably that certain people are sometimes unwilling to make trade-offs between income compensation
and environmental change (see also Blamey and Common
1999).
Table 1 summarises the main differences between EE and
ERE. 6 Note that this presents a somewhat simplied
picture. Obviously, hybrid approaches are possible,
6

A reviewer noted an earlier comparison: namely, Table 11 in

Costanza et al. (1991)

Original article

especially in view of EE being diverse and not characterised by a univocal theory. Moreover, some of the
shortcomings of ERE (according to EE) can be resolved
within the traditional theoretical framework of neoclassical economics. For instance, environmental externalities
can be modelled by describing dynamic causality relationships on the basis of ecological insights. Crocker and
Tschirhart (1992) show that it is possible to incorporate
descriptions of ecosystems within a wider framework of
general equilibrium with externalities. Finally, the objective of sustainable development is also broadly supported
nowadays by ERE, although denitions and interpretations are not always consistent with those adopted by EE
(see next section).
In evaluating the differences between EE and ERE, it is
interesting to note that one of the most inuential biologists of this century, E.O. Wilson, has recently introduced the criterion ``consilience'' as a measure of good
science (Wilson 1998). This denotes that the methods and
starting points of one scientic discipline need to be
consistent with the accepted insights of other disciplines,
across all areas of science, including the natural and
social sciences. Gowdy and Ferrer-i-Carbonell (1999) offer a discussion of ``consilience'' between biology and
economics, the two most important disciplines supporting EE, in order to examine to what extent economists
and ecologists have inuenced each other's way of
thinking about environmental problems and their solutions. Within EE, a dominant idea is that ERE approaches
need to be made coherent with ndings in ecology and
thermodynamics. Nevertheless, this is complicated due to
distinct research traditions and methods (Shogren and
Nowell 1992). In addition, consistency with insights from
technical and other social sciences is also necessary.
Particularly with regard to modelling consumer and rm
behaviour for environmental policy analysis and monetary valuation, insights from psychology and sociology
could be useful.

of capital is maintained separately. ERE starts from weak

sustainability, which emphasises a large degree of substitution of inputs in production and the economy as a
whole. This has been criticised by EE (see Ecological
Economics vol. 22, 1997). Within EE, usually some type of
strong sustainability is emphasised, which is operationalised through goals such as protection of critical ecosystems, striving for at least a minimum area of nature, or
maintenance of biodiversity.
Within EE, frequently another aspect of (un)sustainability
is pointed out: namely, the stability and resilience of
ecosystems. Perrings (1998) mentions two alternative
readings: one is directed at the time necessary for a
disturbed system to return to its original state (Pimm
1984); the other is directed at the intensity of disturbance
that a system can absorb before moving to another state
(Holling 1973). In line with the latter interpretation,
resilience has been phrased ``Holling sustainability'', as
opposed to weak ``Solow-Hartwick sustainability'' (Common and Perrings 1992). As a result, EE studies pay
relatively more attention to the sensitivity of ecosystems
at a micro level, often in applied studies, whereas ERE
extends economic growth theory with environmental
variables, emphasising determinism and approximate
long-term trends in a macro-approach that lacks any
micro-detail. From this perspective, EE and ERE
approaches to sustainability can give rise to both complementary and contradictory insights.

The ``growth debate''

The discussion surrounding sustainable development can

be considered as a ``terminology game'' that does not
resolve the older ``growth debate'' but just disguises it
(see van den Bergh and de Mooij 1999). The growth
debate can be characterised by three main questions: Is
economic growth desirable? Is it feasible? And, is it
controllable?
Both the elaboration of and the answers to these questions
differ between EE and ERE. With regard to the rst
Sustainability and sustainable
question ERE seems to take for granted that economic
development
growth increases social welfare. EE has generated some
criticism on this assumption. Since social welfare is not
There are various denitions of sustainability and espeunambiguously measurable, one can discuss endlessly
cially of sustainable development (see Pezzey 1989; Toman what is a meaningful measure of welfare 7 In addition, one
et al. 1995; van den Bergh and Hofkes 1998; Ayres et al. can ask about the relationship between material welfare
2000). Notably, the opposition between strong and weak
sustainability has received much attention in the last few
7
years. Weak sustainability has been dened on the basis of
In this context, the discussion of GDP as a measure for ``progress'' and welfare is relevant. EE and ERE economists agree that GDP
the concepts ``economic capital'' and ``natural capital''.
is unsuitable as a measure of social welfare. It is better interpreted as
Economic capital comprises machines, land, labour and
reecting the (national) costs incurred to reach a certain level of
knowledge. Natural capital covers resources, environment national welfare. In other words, GDP growth means an increase of
and nature. Under weak sustainability one strives for
the national costs incurred to realise a decreasing or increasing welmaintaining ``total capital'', dened as the ``sum'' of both fare level. GDP was of course never meant as an indicator of welfare,
but has, due to a lack of any good alternative, slowly adopted this role.
types of capital. This allows the substitution of natural
a theoretical foundation for GDP as a measure for social
capital by economic capital, as has been analysed in eco- Although
welfare is completely lacking, trust in GDP growth has started to live
nomic growth theory (Solow 1974, 1986; Hartwick 1977). its own life (e.g., on nancial markets), resulting in GDP growth being
Strong sustainability, by contrast, requires that every type strongly correlated with economic stability
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beyond the level of satisfaction of (basic) needs. ``Relative

income'', the income relative to the (national) income
distribution, is more relevant for this purpose than absolute income, because people measure their material welfare
against that of individuals in their social environment,
which is local or national. This perspective suggests that a
redistribution of income can have a more signicant inuence on social welfare than a continuation of growth.
For addressing the second question in the growth debate:
``Is economic growth feasible?'', the distinction between
weak and strong sustainability is useful. ERE is in general
more optimistic than EE. Notably, it seems to have much
condence in price and market processes that steer
behavioural responses from producers and consumers. To
take just one example, scarcity of natural resources is argued to lead through price information to responses in
terms of substitution, savings and recycling of materials,
and to technological innovations at process and product
levels. EE is more pessimistic, or, better perhaps, more
``precautionary'' about such responses, and is often accompanied by references to thermodynamics. Furthermore, EE states that damages to nature and environment
have assumed such proportions that continuing growth
will almost surely lead to ecological disasters. In this
context, soil erosion, deforestation, enhanced global
warming and loss of biodiversity are regarded as the most
urgent problems. EE expresses serious worries about the
resilience of ecosystems, which depends on the complex
connection between global biogeochemical processes
and ``life-support'' functions of the biosphere, which are
presently under severe pressure from human activities. In
terms of methods of analysis of growth-versus-environment, ERE has recently focused attention on partial empirical analysis through studies that examine de-linking
between certain environmental indicators and income per
capita (``green Kuznets curves''; see de Bruyn and Heintz
1999). Instead, EE relies more on complex systems analysis
that incorporates feedback mechanisms between economy,
growth, environmental quality, natural resources, population growth, welfare level and health status. 8 The last
question in the growth debate is: Can we control or direct
economic growth? Since most governments and central
banks are committed to realising a positive rate of growth,
it is hard to say whether it is feasible policy-wise and
politically to arrange a zero or negative rate of growth.

From an economic perspective, an important derived

question is whether without growth other macroeconomic
goals, such as full employment and price stability, can be
reached. Within EE, no clear-cut answers to these questions have been formulated, due to the fact that the issue of
controllability of economic growth has been largely neglected. Obviously, if this question remains unanswered or
has a negative answer, any discussion of the other questions is a waste of time. Within ERE, the controllability
issue is not considered at all, which is consistent with its
positive answers to the other two main questions in the
growth debate.

International trade
and environment
The development of ERE during the 1990s is characterised by considerable attention to the international dimension of environmental problems and policy, in
particular the relationship between international trade
and environmental policy. The classical trade theories of
Ricardo and Heckscher-Ohlin state that, on the basis of
comparative advantages, international trade increases the
welfare of all contributing countries. Daly and Cobb
(1989) are, however, of the opinion that these insights no
longer hold as the assumption of immobile capital ows
is no longer satised in their view, the modern world is
characterised by free capital ows (capital mobility). This
viewpoint suggests the need for a fundamental discussion
about the relevance of traditional trade theories for formulating environmental policy. Daly and Cobb conclude,
by referring to statements of Maynard Keynes, which
reect the idea that production of products should,
whenever feasible, take place in the own country. An
additional argument for this view is that sustainability at
a regional scale can be better controlled in an autarchic
than in an open region.
In order to ``measure'' regional unsustainability Wackernagel and Rees (1996) have formulated the concept of the
``ecological footprint'' (EF) and applied it to countries (as
well as other spatial units). They conclude that many
countries, in particular small ones, use directly and indirectly more surface area than is available inside their
national boundaries. Evidently, this is compensated by
international trade. Wackernagel and Rees try to argue on
the basis of the EF that autarchy is to be preferred to a
trading region. Van den Bergh and Verbruggen (1999)
criticise the EF indicator and applications:

8
The work of Ruth and Cleveland (1996), which focuses on the
relation between extraction of mineral resources and fossil fuel (energy) resources, ts into this tradition. Extraction of resources is
associated with a transformation of enormous amounts of energy,
both in the extraction process itself and in subsequent processes, such 1. The EF is an example of ``false concreteness'': the
as concentration, smelting, ltering and rening. In order to extract
resulting land area is hypothetical and too crude a
resources from supplies with low concentrations of a desired material,
measure of various types of environmental pressure.
the amount of energy use per useful unit of output needs to rise, and
increasingly so. This means that energy use will follow a progressive 2. The EF method does not distinguish between sustainpattern over time. Technological improvements and recycling can
able and unsustainable land use, notably in agriculture.
slow down the unfolding of such a pattern, but not permanently
3.
Aggregation of different environmental problems
postpone it. Such a type of EE model of extraction is less partial than
occurs through an implicit weighting that lacks any
the traditional, Hotelling type of ERE model (see Dasgupta and Heal
justication.
1979)

18

Reg Environ Change (2001) 2:1323

Original article

4. CO2 emissions due to burning fossil fuels are translated,

on the basis of an arbitrary ``sustainability scenario''
(forestation to capture CO2), into hypothetical seizure
of land.
Comparing the EF of countries with their available land
area implies that national consumption should remain
within boundaries dened by national production opportunities, which is an ex ante ``anti-trade'' bias. This is not
only normative but very arbitrary. Relatively small or
densely populated countries (in terms of available land
area) trade more relative to their national income. Indeed,
spatial scales correlate strongly with the proportion of
trade in consumption. For illustration, cities trade 100% of
their consumption, and the world as a whole is autarchic.
Trade has various negative impacts in social and political
dimensions, such as weakening community structures, and
confusing individual human perceptions of the ecological
impact of individual consumption decisions. On the other
hand, one can also foresee various negative consequences of
minimising international trade, such as the worsening of
international relationships between countries, the destabilisation of international trade agreements and institutions, even trade wars and other conicts, and a lack of
diffusion of knowledge and technology. The fundamental
question of more versus less trade cannot be reduced to the
calculation of an aggregate indicator, but needs to be discussed in a framework that allows a subtle comparison of
the advantages and disadvantages of trade. 9 This needs to
pay explicit attention to the diversity of economic, ecological, sociological and political insights about international
trade relations. To date, EE has contributed mainly to
analysing the implications of international trade for
regional cultures and communities (Daly and Cobb 1989).

A hierarchy of dynamics
In the earlier section on `Ecological versus traditional
environmental economics', it was indicated that EE is
more closely related to resource economics than to the
``economics of pollution''. Perhaps this is best illustrated
by the fact that simple models from population biology
(ecology) have been incorporated in ERE theory of
renewable resources. Specic models have been developed
for the analysis of sheries, forestry and water management.
EE uses more information from ecology for modelling
human inuences on nature and environment than ERE
(see Folke 1999). This includes population dynamics based
on interactive populations, such as symmetric (competition, mutualism) and asymmetric (herbivoreplant, parasitehost, predatorprey) relationships, on multiple

9
For a variety of opinions about the Ecological Footprint, see the
discussion in Ecological Economics vol. 31, no. 3, pp. 317321, as well
as the 12 contributions by economists and ecologists in the Forum of
Ecological Economics vol. 32, no. 3, pp. 341393

generations, or on spatially disaggregated (meta-) populations. Ecosystem models add relationships between biotic and abiotic processes to these population models, for
example the inuence of nutrients on the presence and
growth of certain plant species. An additional level of
dynamics is ecosystem succession, by which the composition, structure and functions of an ecosystem change
until a climax system has been reached An alternative view
proposes a cyclic process without any climax. The theory
often referred to in this context is the ``four-box model''
for terrestrial ecosystems (Holling 1986). It depicts ecosystems and their changes in a two-dimensional diagram
with ``stored capital'' (biomass) and ``connectedness''
(complexity of the foodweb) on the axes. Ecosystems can
then go through four phases: ``exploitation'', ``conservation'', ``release'' and ``reorganisation''. The ``release'' phase,
for instance, is triggered by forest res, storms and outbreak of diseases.
The dynamics of ecosystems has given rise to a question
about the stability and resilience of ecosystems. EE devotes
much attention to this issue. At the moment, resilience is
even examined as an analogy for the functioning of social
systems (bureaucracy, politics, economy, etc.; see Levin
et al. 1998). In the above-mentioned ``four-box model'',
management aimed at articially prolonging a certain
phase, notably ``conservation'', can reduce the resilience of
the system. For example, checking small forest res, which
leave seeds intact, will result in an accumulation of forest
biomass. This in turn will increase the probability of the
occurrence of a large forest re at a very high temperature,
which in turn can destroy plant seeds and thus prevent the
``reorganisation'' phase from occurring successfully.
A last level of dynamics that is studied within ecology and
EE is evolution. Within biology, evolutionary theory has
provided the necessary integration of various subdisciplines, such as molecular biology, genetics, cell biology,
physiology, development biology and ecology. Within EE,
(co-)evolution is regarded as a conceptual model for addressing the relationship between economy and environment in the long-run. This connects closely to an historical
approach to the analysis of the interaction between economic development, environmental change, technology
change and institutional change. Examples of such interactions are: the inception of the Industrial Revolution
(Wilkinson 1973; Norgaard 1994); the historical transition
from the huntergatherers era to primitive agricultural
societies (Gowdy 1994, 1998); and perhaps even the
current wave of technological innovations in the areas
of biotechnology and information and communication
technology.
Important implications of this hierarchy of dynamic processes are as follows. In the rst place, a sufciently large
disturbance by humans will not only create a temporary
removal from an equilibrium, but will also lead to dynamic
effects throughout the hierarchy of dynamics. This can
have irreversible consequences, for example when ecosystem components and functions are lost.
The complexity of temporal dynamics often requires an
explicitly spatial approach: for example, land use, water

Reg Environ Change (2001) 2:1323

19

Original article

use and diffuse pollution inuence spatial causeeffect

chains that bring about complex system dynamics in space
and time. Especially in water-driven systems, like wetlands, a spatial approach is indispensable. This requires
the use of much detailed information, which in turn causes
aggregation problems, both in the description of processes
and the evaluation of process outcomes.

Individual behaviour
and environmental policy
EE criticises the points of departure of ERE with regard to
individual behaviour but generally supports its central
ndings on policy, which can best be summarised as
``correct prices''. The criticism could, however, give rise to
a study of alternative models of individual behaviour and
their implications for environmental policy. The rst results of such a research programme suggest that price
instruments could certainly be less effective than is often
taken for granted (van den Bergh et al. 2000). Furthermore, inuencing preferences could become an important
pillar of environmental policy aimed at realising long-term
sustainable development (Norton et al. 1998). Normative
objections against preference-oriented policies are outmoded; indeed, preferences have long been moulded
through advertisements by private businesses for purely
commercial interests. Nevertheless, environmental policies
aimed at inuencing preferences will be effective only if
complementary instruments like environmental legislation
and other types of environmental regulation are employed
For example, to reduce speeding by cars one can combine:
downsizing of car engines, technical speed controllers on
engines, prohibiting advertisements of fast cars, and
obligatory driving-style courses.
A general difference between environmental policy
according to EE and ERE, as indicated in the section `Ecological versus traditional environmental economics', concerns the difference between the main goals. ERE focuses on
internalising, or more precisely ``optimising'', external
costs. Economic or market-based instruments t well in this
scheme as they provide incentives to individual producers
and consumers which, according to the theory, lead to social efciency (``marginal social costs equal marginal social
benets''). EE is aimed at sustainability and emphasises the
precautionary principle in dealing with complexity (ecosystems), surprises (environmental disasters) and uncertain developments (climate change). Common and Perrings
(1992) use a theoretical model to analytically illustrate that
economicecological systems are not completely ``observable'' and ``controllable'' via prices and instruments that
directly inuence prices. In other words, price instruments
fall short in the case of sustainability.
A number of instruments have been proposed to address
the uncertainty and complexity surrounding ecosystems
and sustainability. The notion of ``safe minimum standards'' (Ciriacy-Wantrup 1952) points to the fact that
efciency means exploring the borders, whereas in many
20

Reg Environ Change (2001) 2:1323

circumstances characterised by a large degree of uncertainty it would be better to take account of safety margins.
A exible instrument to do this is an ``environmental
bond'' (Costanza and Perrings 1990). An investment or
project that is surrounded by a great deal of uncertainty
concerning environmental consequences is complemented
by an insurance bond with a value equal to that of the
maximum expected environmental damage. This bond
functions as a deposit that is completely or partly refunded
(with interest) depending on the amount of environmental
damage that has resulted from the respective investment
project. If environmental damages are nil, the entire deposit is returned; if there are actual or threatening negative
environmental effects, the deposit serves to compensate or
prevent damage. This instrument can, inter alia, be applied
to land reclamation, investment in infrastructure, transport and treatment of hazardous (toxic, nuclear) substances, and location of agriculture and industrial
activities near sensitive nature areas. As a consequence of
environmental bonds, the (expected) private costs of such
activities will increase, causing investors to make more
conservative decisions, and so take account of environmental risks associated with human activities and investment projects.
Uncertainty within ERE is usually analysed by dening
``states of the world'' with associated probabilities, and
maximising an expected benet function. Fundamental or
complete uncertainty, i.e. surprises, implies, according to
EE, a different approach, namely, ``adaptive management''.
This is based on the idea that management of complex and
uncontrollable systems requires an interaction between
experimental research, monitoring, learning processes,
and policy choices, with the objective to learn from disturbances. This recipe has been applied to problems of
sheries, agriculture (ecological alternatives for pesticides)
and forestry. Adaptive management also covers the interaction between various disciplines, experts and ``stakeholders'' (Holling 1978; Walters 1986; Lee 1993;
Gunderson et al. 1995).
Finally, within EE, ideas can be found about economic
structural change, notably, relating to ``industrial ecology'' and ``industrial metabolism'' (see Ayres 1998; Duchin
et al. 1994; Socolow et al. 1994; Graedel and Allenby
1995). These emphasise spatial and sectoral adjustments
of economic activities to realise a minimal environmental
pressure caused by substance and material ows. For this
purpose, a balance between such strategies as ``dematerialisation", recycling and reuse, waste management and
increasing durability of products is needed.

Conclusion
The themes discussed in the previous sections illustrate
that a simple, one-dimensional opposition between EE
and ERE is impossible. Moreover, searching for interactions and complementarity between EE and ERE seems
fruitful. There certainly is overlap, partly because EE is
not strictly conned ERE represents a specialist, analytic

Original article

approach, based on slowly and consistently extending

knowledge and on strict assumptions regarding economic
processes. EE is more pluralistic, aimed at the integration
of existing insights. Although it is not always internally
consistent, it is perhaps more creative and innovative at a
conceptual level. Costanza et al. (1993) state that, in
theory and modelling, a trade-off needs to be made between the criteria of generality, precision and realism.
One could say that ERE emphasises generality and precision, whereas EE focuses on realism. Within ERE a
theoretical consistency among all parts (insights) has
resulted in an impressive ``building''. However, if only a
few of the foundations are taken away, the whole collapses. This does not hold for EE, where due to pluralism
opposite opinions are much more common. 10 Pluralism
is very important for an open discussion of the advantages and disadvantages of scientic ndings at the level
of policy preparation and political decision-making
regarding environmental policy. 11
EE can develop further along two paths. One involves
more intense co-operation between natural and social
scientists to inuence each other's way of thinking and
construct joint theories and models, in line with Wilson's
notion of ``consilience''. In the view of many ecological
economists, this is the main motivation for EE and the
area where it can be most effective. The other path is to
broaden the social science spectrum so as to provide for a
real alternative paradigm to the neoclassical methodology
of ERE. Some ecological economists seem to think that this
is the way forward (see Spash 1999). Currently, however,
EE may lack the necessary social science expertise to
support such an ambitious goal. Therefore, it should link
up with modern research on the relationship between individual and group behaviour (institutions and ethics) in
biology, anthropology, communication science, economics, political science, psychology and sociology.
Acknowledgements This is a translated and updated version of
an article written for the lecture series ``Environment and Economics'' (Spring 1999), Ministry of Housing, Physical Planning
and Environment, The Hague, The Netherlands. I am grateful to
A. Ferrer-i-Carbonell and an anonymous reviewer for helpful
comments on the introductory section.

10

Spash (1999) notes that the European branch of the International Society for Ecological Economics tends to focus more on socioeconomics and political economy (including philosophy, environmental ethics, institutional economics, sociology and political ecology), whereas the American approach can be characterised as more
scientic. The most fundamental issue raised by the European EE in
this respect is perhaps that it looks for alternatives to free market
systems, as these ``...educate individuals to act as selsh hedonists and
create self-perpetuating power structures which reinforce inequity''
(Spash 1999, p. 428). Three journals, Environmental Ethics, Environmental Politics and Environmental Values, provide information
regarding these alternative perspectives
11
In the USA, the distinction between ERE and EE is clearer than
in Europe, presumably because ERE is more developed and more
strictly applied in Europe, there seems to be somewhat more room for
pluralism and pragmatism, as well as for discussion of the shortcomings of ERE

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